Vietnam's economy to stabilize further this year: IMF

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The International Monetary Fund has said Vietnam's economy will stabilize further in 2012, but cautioned against premature loosening of policies.

The economy is projected to grow at 6 percent and inflation to decline to about 10.75 percent, the IMF Executive Board said in a report released Friday, adding that both foreign exchange reserves and current account deficit could rise.

The IMF's economic growth forecast is higher that the range of 5.2-5.7 percent expected by the government, following a slowdown in the first quarter. Meanwhile, the government is confident about its goal to keep inflation in single digits.

The economy expanded 4.38 percent in the first half of the year, down from 5.63 percent a year earlier.

The fund's executive directors, while welcoming the authorities' commitment to macroeconomic stability, noted that vulnerabilities and risks remain. "A key challenge will be to balance support for the slowing economy against the risk of eroding hard-won confidence, while rebuilding policy buffers."

The IMF report said Vietnam should give careful consideration to further cuts in policy rates, focus further on containing current non-wage spending, and improve the quality of public spending. The IMF also urged authorities to speed up implementation of their bank restructuring plan as well as efforts to reform state-owned enterprises.

Vietnam has cut interest rates five times this year to spur growth, with the latest reduction effected early July.

Deputy Prime Minister Nguyen Xuan Phuc said last month that the economy "has already passed its toughest period." The government will try to balance its goals of controlling inflation and maintaining stable economic growth, he said.

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